After years of renting an apartment you have decided to purchase a house. You are earning a good income and you would like to inquire about a home loan. What various bonds are available and which should you choose?
When requesting a bond you should consider what you want and what the bank will grant you. Accessibility to money in your bond and a hundred percent loan are obtainable from your bank should you have the financial security to pay the bank back. South African banks offer various home loan options therefore contacting your bank will be the next step.
As there are different types of bond options they are formulated based on the interest rate. The following are different kinds of loan options available from your bank:
Variable rate home loan is dependant on what is called a repo rate which is the lending rate offered by the South African reserve bank to other banks. Should the rate increase or decreases it will effect your bond payments accordingly.
Should you find that you are prepared to pay a set amount of money towards your bond then a rate that is fixed will be more suitable. In this case rate increases does not affect you and the monthly payment you make to your financial institution is consistent. This means that you are unable to benefit from a declined rate.
Should you however feel that you require a bond that meets a variable rate and a fixed rate then choosing a bond that is capped will suite your needs. This means that you repay your home loan at a different amount and you benefit from paying a lower loan rate amount should the interest rate decrease. To apply for this type of bond you would have to meet certain requirements.
Another option to consider is a bond that reduces its rate within six to twelve months. The lower rate is not dependant on the repo rate. This application is similar to changing your bond by doing so you can benefit from a lower rate. It is considered to be an effective way to conserve money and shorten the time to pay off your bond.
In South Africa people are fortunate to apply for a bond to finance their home or business. Certain requirements and financial records are presented to the bank from which they will ascertain for which bond you will qualify and the amount they will provide you with a home loan or business loan.
In order to benefit from the best option you can find a home loan mortgage broker to assist you with a bond that suits your requirements. FindBond.co.za will provide you with information on bond application, home loans and debt management. By Adriana Levi